Tips For Improving Your Credit Score
Steps You Can Take to Be More Attractive to Lenders
A Review On Credit Score
Last week, we talked about the importance of credit score and why it matters when you're hoping to buy a home, various factors which affect your credit score, and how your score impacts Loan-Level Price Adjustments on your loan. What if you've recently run a credit report and your credit isn't in a great place? Don't sweat it, we're here for you with this week's topic. Today, we're talking more about credit score. How do you improve it? Are there specific steps you can begin taking today to help you become more attractive to a lender? Continue reading to find out!
Improving Your Credit Score Quickly
If your credit score is lower than you'd like, there may be a few ways to improve it quickly. Depending on the factors contributing to your score, you may be able to raise it by as many as 100 points fairly quickly. But is 100 points even realistic? Rod Griffin of Experian, thinks so!
“The lower a person’s score, the more likely they are to achieve a 100-point increase,” he says. “That’s simply because there is much more upside, and small changes can result in greater score increases.”
Below, we've listed 9 ways for you to build and improve your credit score!
Step # 1: Pay credit card balances strategically
A good guideline on how much of your credit limit you are using is this: Spend less than 30% of your limit on any card... The lower the better! Those with the highest credit scores use less than 7%. You want to make sure your balance is low when the card issuer reports it to the credit bureaus because that is what's used in calculating your score. An easy way to do that is to pay down the balance before the end of the billing cycle or pay several times throughout the month to always keep your balance low.
Step # 2: Ask For A Higher Credit Limit
It instantly lowers your overall credit utilization when your credit limit goes up and your balance remains the same. This can improve your credit. If your income has increased or you've added more years of positive credit experience, you could have a decent shot at getting a higher limit.
Step # 3: Become An Authorized User
This process is sometimes also referred to as "credit piggybacking" and is when a family member or friend with a credit card account with a high credit limit and a good history of on-time payments allows you to be added as an authorized user. This adds the account to your credit reports, so its credit limit can help your utilization and allows you to benefit from the primary user's positive payment history. One thing to clarify is that the account holder doesn’t have to let you use the card or give you the account number for your credit to improve.
This step is especially helpful when the account holder's account reports to all three major credit bureaus (Equifax, Experian and TransUnion).
Step # 4: Pay Bills On Time
This step seems like a no-brainer, but shouldn't be overlooked. Many people don't know that a missed payment can stay on your credit reports for 7½ years. If you ever miss a payment by 30 days or more, call the creditor immediately. Settle up soon as you can and ask the creditor to consider no longer reporting the missed payment to the credit bureaus. An important this to note is that every month that an account is marked delinquent hurts your score.
Step # 5: Dispute Errors
Another thing that might be contributing to your low credit score is a mistake on your report. Disputing any errors can easily help you to improve your credit.
You can request a free report from AnnualCreditReport.com to request yours and check for mistakes, such as payments marked late when you paid on time, someone else's credit activity mixed up with yours, or negative information that’s too old to be included anymore. Once you've identified any, dispute those errors.
Step # 6: Pay Off Any Collections Accounts
This one seems obvious, too, but is very important. Not only will paying off a collections account remove the stress of having the outstanding payment hanging over your head, it also removes the threat of being sued over the debt. Additionally, you may be able to convince the collection agency to stop reporting the debt once it is paid. If you have collections accounts on your credit reports that are too old to be listed or are inaccurate, you can also remove those.
Step # 7: Use A Secured Credit Card
A secured cared is a type of card that is backed by a cash deposit. This means that you pay it upfront and the deposit amount is typically the same as your credit limit. You can use it like a normal credit card, and your on-time payments help build your credit.
Step # 8: Get Credit For On-Time Rent And Utility Payments
Did you know that you there are rent-reporting services that you can use to can add on-time rent payments to your credit reports? Even though rent payments are not considered by every scoring model, a long record of consistent and on-time rent payments will be visibile by a potential creditor looks at your reports and can only help!
Step # 9: Mix Up Your Credit
If you have only credit cards, consider getting a loan. Specifically, a credit-builder loan can be a low-cost option that exists to help you build your credit! Just remember to double check that the loan you're considering adding reports to all three credit bureaus. Another thing to consider if you have only loans or a few credit cards is a new credit card of a different type than what you currently have. In addition to improving credit mix, this can reduce your overall credit utilization by providing more available credit.
Today, we continued our discussion about credit scores and showed you how to address. a lower-than-desired credit score. We hope we were able to help you learn new ways to improve your credit score!
Thank you for sparing a few minutes to finish this conversation with us. We hope you'll join our email list to receive next week's article!